Even Banks and Credit Card Companies are Dishonest
There is a truism ~ everybody lies. These days, even the people you should be able to trust to help you look after your money will lie to you. Just three recent examples in the news;
- Thousands of staff at Wells Fargo Bank routinely created false customer accounts based on real customers’ email addresses. All told about 2 million fake accounts were created. These fake accounts were allegedly used by staff to meet their sales targets ~ and some 5,300 Well Fargo staff have been fired. Would that it were all ~ trust me, there is more nasty news to come on this one concerning customer charges and wrong-doings higher up in the bank.
- The great credit card scandal continues. Credit cards are a rip-off for everyone except the banks. Despite official interest rates being at an historic low, the interest charged on credit card balances continues to rise to usury levels. And, in Britain Mastercard is accused of setting punitive charges on retailers, resulting in an estimated overcharging of £14 billion between 1992 and 2008. Guess who ends up paying for all this ~ you do. Mastercard are being taken to court in a class action.
- Four ex-employees of Barclays Bank are facing long jail terms for manipulating LIBOR. You may think LIBOR, (London Inter Bank Offered Rate), has got nothing to do with you. As a matter of fact the interest costs of everything you have ever borrowed is based on Libor. If you can’t trust the financial markets, then who can you trust?
Not one of the companies and people you trust to manage your money are completely honest with you. When it comes to your money, trust nobody.
Complete honesty is much more than not cheating, stealing, and lying ~ although banks, insurance companies, pension providers, credit card companies, financial advisers, et al, do more than enough outright cheating, stealing, and lying. Complete honesty means not lying by omission, being straightforward, being open, telling you what you need to know, avoiding obfuscation… None of the financial companies and people you deal with abide by that definition of honesty.
If they wanted to be really honest, then they wouldn’t have you sign a legal agreement which included pages and pages of small print.
What should you do;
- Check your bank and credit card statements for unexpected items, especially unexpected charges.
- Don’t put all your eggs in one basket.
- If it looks to good to be true it is.
- If you don’t understand something, have it clearly explained until you do understand.
- Never pay for financial advice, never pay an up-front or annual fee for a credit card or bank account.
In high finance there is a concept called ‘counter-party risk’ ~ one of the assumptions in that concept is ‘buyer beware’, never assume that the person or company you are dealing with is telling you the truth, the whole truth, and nothing but the truth.
George Bailey would be horrified.
THEY HAVE LEARNED NOTHING AND FORGOTTEN NOTHING
After the abdication of Napoleon, Tallyrand was supposed to have coined the above phrase when speaking about the restored Bourbon dynasty to the throne of France. Einstein may have unwittingly borrowed from this when he gave as his definition of insanity as Doing the same thing over and over again and expecting different results. For another example of willful hubristic stupidity to which both quotations could apply you need look no further than the major banks of Europe and North America. The people running these organisations still seem to be completely lacking in ability, common sense, expertise, foresight, honesty and integrity. One major scandal after another appears in the press with such predictable regularity that nobody seems to take much notice any more. And, for a professional banker with 30 years experience, it is as plain as pikestaff what, why, when, how, where, and who went wrong in each and every case.
Bank of America was ordered to refund and pay fines amounting to about $772 million in April of this year because of it’s illegal charging of customers for credit monitoring and credit reporting services that were never delivered. Allegedly, there was an institutional culture of mis-selling in the bank’s telemarketing department, or so says the US Consumer Financial Protection Bureau.
In the UK the Co-op Bank has recently apologised for making a loss of £1.3 billion in 2013. The bank has also said that it does not expect to make a profit in 2014 and 2015. There is a strong argument for renaming this bank, as it is no longer a co-operative organisation, having already sold out to US hedge funds to plug a £1.5 billion hole in its balance sheet. Another £400 million is now required. The Co-operative Group is no longer the bank’s parent, and any claims the bank ever had to being an ethical organisation have vanished like smoke in the wind. The bank has admitted that these losses are due to ‘past misconduct and poor documentation.’ This is a supposedly ethical bank which has to pay £103 million compensation to customers for mis-selling Payment Protection Insurance, and another £114 million for overcharging on mortgage payments. The disgraced Paul Flowers, a drug addict who is also addicted to casual homosexual relations, had no abilities or experience to qualify his appointment as Chairman of the Co-op Bank. If nothing else that appointment says a lot about how badly this bank was run. I see no immediate signs of improvement.
Credit Suisse has pleaded guilty in US courts to criminal charges related to helping Americans evade taxes. The giant Swiss bank will pay a fine of some $2.5 billion. Eric Holder, US attorney general stated that hundreds of Credit Suisse employees, ‘conspired to help tax cheats dodge US taxes.’ If I were one of those Credit Suisse employees I would not plan on visiting the USA any time soon. This is not the first example of Bankers forgetting that they are not above the law.
Deutsche Bank is looking for 8 billion Euro, mostly from Qatar, and mostly to help the German bank pay fines, compensation and the cost of properly meeting regulatory requirements in its Investment Banking arm. Deutsche is another bank facing a shareholders’ revolt over plans to boost executive bonuses.
Standard Chartered has just suffered a shareholder rebellion at its Annual General Meeting. There was a 41% vote against its pay policy, the over-large number of executive directors on the board, the soft targets for top executives, high bonuses and a profit warning. Standard Chartered was recently fined £415 million for breaching US sanctions against Iran.
BNP Parisbas is currently trying to agree a $3 billion plea-bargain with the New York Department of Financial Services to resolve investigations into allegations that the French Bank violated US sanctions against Iran and Sudan, among other countries. Again, these are criminal charges. Employees concerned will be lucky if the worst they can expect is the sack.
British banks are facing an increasing number of complaints about fee-paying packaged accounts. Customers are paying up to £300 a year for supposed benefits they didn’t know existed or didn’t ever want. As banks see these packaged accounts as their new nice little earner, they are routinely rejecting customer complains, meaning the UK Financial Ombudsman’s disputes arbitration service becomes involved. Some 78% of referred complaints are upheld after initial rejection by the bank concerned. Some critics have said that this shows banks have a ‘rotten culture’ and that they have learned nothing from previous mis-selling scandals. As there are some 9 million packaged accounts already in use, we can expect the banks to be hit with another serious of massive fines for mis-selling in due course. British Banks have set targets for the number of these accounts sold by their retail staff, so expect customers to continue to be pressured into taking one of these useless products.
In 2013 Britain’s four largest banks; Barclays, HSBC, Lloyds and Royal Bank of Scotland were between them forced to set aside £21.5 billion to cover fines and compensation to customers. This is in addition to a total of about £25 billion incurred by these banks since the financial crash of 2008, in relation to meeting the costs of financial misconduct, including rigging the LIBOR market.
It’s not just in the major centres that bankers seem to have been making one monumentally incorrect decision after another. In Hungary, the banking sector faces costs of billions of florints to unwind the ‘foreign currency mortgages’ scandal. Anyone who thinks that borrowing in a currency where you have no income stream is a good idea should be locked up, bankers especially.
All of the above cautionary tales have some common causes. Monumental hubris and a complete lack of relevant banking expertise by the directors and management concerned at each bank. Worse than that, even a cursory look at the facts of each case shows a surprising reluctance to face the brutal truth by the people concerned.
Sadly, it is not only banks that seem to have an insidious culture of sticking the corporate head in the sand. Companies as diverse as BP, Glaxo-Smith-Kline, Pfizer and UBS have been hit with huge corporate fines in recent years. Often these fines are the result of mis-selling. You tell me why BP has recently been fined $34 billion.
The hard truth is; Any new or revamped product offered by a bank should be treated with the utmost suspicion. If your bank gives you any hassle, find another bank. George Bailey must be turning in his grave.